Faced with a KPMG audit showing the proposed 65-aircraft F-35 purchase would have cost taxpayers upwards of $30 billion (according to some reports as much as $40 billion), over a 36-year span, the government had no option but to reboot, sources familiar with the decision say. “Can you imagine now taking an additional $23 billion out of the defence budget over the next 30 years?” asked one. “You would simply have an air force. That would be the Canadian military. You would have nothing else.”

On tap now is a competition among at least five aircraft, including Dassault’s Rafale, Boeing’s Super Hornet, Saab’s Gripen, the Eurofighter Typhoon, and Lockheed-Martin’s F-35, to replace Canada’s aging CF-18s. Industry players have quietly been led to expect this will flow from the current “options analysis” underway in Ottawa.

At a cabinet committee meeting Tuesday, sources familiar with the discussion say, it was decided that the F-35 as a sole-source program could not go ahead, given the contents of the KPMG report. What remained unclear was a strategy for selling the reversal to Canadians, and for dealing with the fallout — including the potential impact on the Canadian aerospace firms and allies in the F-35 consortium.

The KPMG audit is to be released next week. The F-35 dominated Question Period on Friday, with opposition MPs calling on Defence Minister Peter MacKay to resign.

The CF-18s now flown by the RCAF will have reached the end of their natural lives, even with upgrades, by 2020. The government is known to be considering a range of options for meeting Canada’s future air needs – including a mixed fleet, and various combinations of old fighters, new planes and unmanned aerial vehicles.

Meantime, to date, according to Industry Canada’s website, 70 Canadian firms have landed $435 million US in F-35-related contracts. Industry sources say most of these are not likely in jeopardy, regardless of which plane the government selects, because the technology in question is so specialized.

Those arguing for an open, competitive bidding process have said for years that even several hundred million is a pittance compared with what could accrue to Canadian aerospace firms if the new jets were built and serviced in Canada. Several of the rival firms have indicated a willingness to build most or all of their aircraft in Canada if chosen.

Lockheed-Martin will be at the table regardless, and may eventually get the nod for an unknown number of planes. However, news that Canada is backing out of sole-sourcing the contract, and introducing a competition, is sure to have ripple effects in other Western capitals, including Washington, which has committed to buying 2,443 F-35s. Under terms of the nine-member consortium’s arrangement with Lockheed-Martin, the unit cost is tied to the number of aircraft ordered any given year. As numbers dwindle, costs rise. The same goes for non-recurring engineering costs.

Indeed, the potential impact on Ottawa’s relationship with Washington figured in the timing of the current change of strategy, a source familiar with the discussions said. “The PM (Stephen Harper) didn’t want it to become a (U.S.) election issue and therefore hurt Canada-U.S. relations.”

In retrospect, it is clear that the Conservatives have been laying the table for this shift for some time. Public Works Minister Rona Ambrose said in the House of Commons Nov. 22 that the options analysis would be “a full evaluation of choices, not simply a refresh of the work that was done before.” Chief of the Defence Staff Thomas Lawson, speaking before a parliamentary committee recently, said the F-35 is not the only modern aircraft with stealth capability – implicitly undermining the main argument for a sole-sourced contract.

Unknown, still, is what impact the Conservatives’ conversion on the road to Damascus will have politically. Judging from Friday’s showing in the House, their strategy for now is to turtle: Hunker down and stick to talking points: “We are determined to continue with our seven-point plan …”

There is an opportunity, however, for them to turn this to their advantage.

The F-35 sole-sourced contract has been an albatross around the government’s neck from the day it was announced in 2010, with a supposed price tag of $9 billion. Former assistant deputy minister (materiel) Alan Williams has waged a quiet and largely successful jihad against the purchase, which he considers both improper and not in Canada’s interest. Former industry minister David Emerson recently published a report in which he suggested, without mentioning the F-35, that Canada could do a much better job securing industrial benefits from aircraft procurements.

The obvious way through this, therefore, is for the Conservatives to simply say, “We heard. We learned. We listened.” Establish a formal competitive bidding process, arms-length, with experienced bureaucrats in charge. Then step back and let the experts make the wisest choice for Canada. It would be difficult for the opposition, partisanship aside, to criticize such a process. It would have the extraordinary advantage, from a political optics point of view, of being right.

I am a national political columnist for Postmedia News. My work appears in the National Post, on Canada.com, the Ottawa Citizen, Montreal Gazette, Calgary Herald, Edmonton Journal, Halifax Chronicle-Herald... read more and Vancouver Sun, among other publications. I write primarily about national politics and policy.View author's profile